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The case of Kathleen Chung, who allegedly cashed the winning ticket at her brother's convenience store in Burlington in early 2004, was profiled by the CBC's Fifth Estate, triggering a report by the Ontario ombudsman. ((CBC))

Three family members  in the Toronto area have been charged in the theft of a $12.5-million lottery prize, while police seek the rightful owner of the Lotto Super 7 ticket bought in 2003.

Two of the accused are a father and son who worked at a Burlington lottery outlet and were actively stealing tickets from customers, Ontario Provincial Police Commissioner Chris Lewis said in Toronto after the arrests Wednesday.

After the Lotto Super 7 draw on Dec. 26, 2003, the pair handed the ticket over to a female family member to claim, the police allege.

The Ontario Lottery and Gaming Corporation paid out the prize in December 2004.

Profile of rightful winner

Lottery officials say the actual winner of the $12.5-million prize could be a group that buys tickets regularly. The person or persons bought the original Super 7 ticket at That's Entertainment in St. Catharines in October 2003.

It was handed in for validation at the Variety Plus store in Burlington, and the buyer was never told it won a free ticket that went on to win the big prize on Dec. 26. Police believe the customer lived in one city and worked in the other and had a unique spending habit on multiple tickets.

The customer played Super 7 regularly but also played other lottery products from time to time.

Kathleen Chung, 29, her brother Kenneth Chung, 28, and the pair's 60-year-old father, Jun-Chul Chung, face a string of charges from theft and fraud to money-laundering and possession of proceeds of crime.

Police have also seized many of the family’s assets, including bank accounts, five luxury vehicles, two residential homes, three commercial properties, and other personal property such as jewelry and electronics, bought after the win, Insp. Don Perron said.

At a separate news conference Wednesday, OLG chair Paul Godfrey said the organization will pay the rightful owner of the winning ticket the full prize amount plus interest.  

"Someone in our province has potentially been denied a $12.5-million jackpot that is theirs as the rightful ticket purchaser," he said. "We want to find that person. We are committed to making sure the right prize gets in the right hands each and every time."

Using a new in-house data and analytic tool called DART (data analysis and retrieval technology), the OLG created a customer and ticket profile for the winning ticket, Godfrey said.

DART allows OLG to review billions of transactions in a matter of minutes to determine patterns that identify potentially fraudulent behaviour and claims.

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OLG chair Paul Godfrey tells a news conference Wednesday that the rightful owner of the ticket will be paid in full plus interest. ((CBC))

"We can find out where tickets with those same winning numbers have been purchased, where they've been validated, which city, which retailer," Godfrey said. "[It] also allows us to know everything there is to know about a ticket, about patterns and routines of play, locations, timing and habits."

CBC's The Fifth Estate profiled the case of Kathleen Chung, who allegedly cashed the winning ticket at her brother's convenience store in Burlington back in early 2004.

The case raised many red flags after Chung claimed not to recall where she bought the ticket and refused a polygraph test. 

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At first, Chung called the lottery prize office, saying she was phoning on behalf of her brother who "owned" the ticket.

When she appeared at the prize office in person on Feb. 5, 2004, she claimed it as her own, denied a connection to any retailer and even prepared to sign a declaration stating she didn't have a brother.

However, an OLG investigator discovered a familial link between Chung and the store where she validated her winning ticket.

The OLG eventually paid out the money without the usual fanfare, because it was unable to prove any wrongdoing.

The provincial police investigation and arrests follow a scathing report from Ontario’s ombudsman, which was triggered by the CBC's The Fifth Estate story. 

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Ontario's lottery corporation says the winning ticket was bought in St. Catharines and validated in Burlington. ((CBC))

Since 2007, hundreds of wins have come under question, and the police have taken on a key role in the investigations.

A forensic audit released in February 2009 revealed that lottery retailers, employees and their families have taken home $198 million in prizes over the past 13 years.

Starting on Jan. 1, 2008, a unit of 14 police officers has been working with the OLG regulator, the Alcohol and Gaming Commission of Ontario, to investigate insider and suspicious wins.

In 2008, the police investigated 477 insider and suspicious wins, resulting in charges against 14 people. Last year, 355 such wins were investigated and four people charged.

Search underway for rightful winner

At their news conference Wednesday, police also released information they hope will identify the rightful winner of the $12.5 million. The customer profile matches that of a group play, Insp. Bill Price revealed.

The Super 7 ticket was purchased at That's Entertainment in St. Catharines, Ont., in 2003. That original ticket was redeemed at the Variety Plus store in Burlington — where Kenneth Chung was manager — and it won a free ticket in the Dec. 26 draw, worth $12.5 million.

The winning numbers for the Dec. 26 draw were: 6, 8, 14, 25, 36, 41 and 42. Police believe the customer lived in one city and worked in the other and had a unique spending habit on multiple tickets. The customer played Super 7 regularly but also played other lottery products from time to time.

"We are optimistic that publicizing information about this investigation will help identify the victim of this fraud," Lewis said.    

The three accused were to be released  later Wednesday — Kenneth and Jun-Chul Chung on $100,000 bail and Kathleen Chung on $500,000 bail. All of them had to surrender passports and are not allowed to communicate with each other.

They are due back in court on Oct 27 in Milton.